Correlation Between BBVA Banco and Dollar Tree

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Can any of the company-specific risk be diversified away by investing in both BBVA Banco and Dollar Tree at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining BBVA Banco and Dollar Tree into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BBVA Banco Frances and Dollar Tree, you can compare the effects of market volatilities on BBVA Banco and Dollar Tree and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in BBVA Banco with a short position of Dollar Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of BBVA Banco and Dollar Tree.

Diversification Opportunities for BBVA Banco and Dollar Tree

BBVADollarDiversified AwayBBVADollarDiversified Away100%
0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between BBVA and Dollar is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding BBVA Banco Frances and Dollar Tree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar Tree and BBVA Banco is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on BBVA Banco Frances are associated (or correlated) with Dollar Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dollar Tree has no effect on the direction of BBVA Banco i.e., BBVA Banco and Dollar Tree go up and down completely randomly.

Pair Corralation between BBVA Banco and Dollar Tree

Assuming the 90 days horizon BBVA Banco Frances is expected to generate 2.11 times more return on investment than Dollar Tree. However, BBVA Banco is 2.11 times more volatile than Dollar Tree. It trades about 0.24 of its potential returns per unit of risk. Dollar Tree is currently generating about 0.09 per unit of risk. If you would invest  1,020  in BBVA Banco Frances on October 21, 2024 and sell it today you would earn a total of  1,100  from holding BBVA Banco Frances or generate 107.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

BBVA Banco Frances  vs.  Dollar Tree

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 020406080100120
JavaScript chart by amCharts 3.21.15BFP DT3
       Timeline  
BBVA Banco Frances 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in BBVA Banco Frances are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, BBVA Banco reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan1012141618202224
Dollar Tree 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Dollar Tree are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Dollar Tree reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan60657075

BBVA Banco and Dollar Tree Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-17.5-13.11-8.72-4.320.04.739.6214.5119.424.29 0.010.020.030.040.05
JavaScript chart by amCharts 3.21.15BFP DT3
       Returns  

Pair Trading with BBVA Banco and Dollar Tree

The main advantage of trading using opposite BBVA Banco and Dollar Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBVA Banco position performs unexpectedly, Dollar Tree can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Dollar Tree will offset losses from the drop in Dollar Tree's long position.
The idea behind BBVA Banco Frances and Dollar Tree pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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